Valuation & AppraisalQuestion 89 of 120
The cost approach to value is often most appropriate for:
a.Typical existing single-family homes with many recent sales
b.Vacant land with no improvements
c.Newer or special-purpose properties with few comparable sales
d.Rental apartment complexes valued on income
Explanation
The cost approach estimates value as land value plus the depreciated cost to rebuild the improvements, and it works best for newer or special-purpose buildings such as schools or churches where comparable sales are scarce. It relies on estimating replacement or reproduction cost and deducting depreciation. It is less reliable for older properties with significant depreciation.
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Related questions on this topic
- Which approach to value estimates a property's worth by comparing it to recently sold similar properties?
- The appraisal principle stating that a buyer will pay no more than the cost of an equally desirable substitute property is:
- In the income approach, the relationship used to convert net operating income into value is the:
- An appraisal is best described as:
- Depreciation in appraisal that results from outdated design or features, such as an obsolete floor plan, is called:
- A loss in property value caused by negative factors outside the property, such as a nearby factory or declining neighborhood, is:
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